Social Studies (2010) Grade(s): 12 - Economics

SS10.E.10

Explain the structure, role, and functions of the United States Federal Reserve System.

Unpacked Content

Knowledge

Students know:
  • The functions of money: medium of exchange, unit of account (measure of value), and store of value.
  • The role of the Federal Reserve in the United States' economy.
  • The 3 primary monetary policy tools: reserve ratio, discount rate, and open market operations to influence the federal funds rate.
  • How the 3 primary monetary policy tools impact the money supply and the overall economy.

Skills

Students are able to:
  • Determine the specific economic impact of changes in the reserve ratio.
  • Determine the specific economic impact of changes in the discount rate.
  • Determine the specific economic impact of open market operations on the federal funds rate.
  • Determine the appropriate monetary policy to promote employment.
  • Determine the appropriate monetary policy to combat inflation.

Understanding

Students understand that:
  • Money functions to increase trade.
  • Monetary policy tools are used to promote employment and economic growth.
  • Monetary policy tools are used to combat inflation.
  • The Federal Reserve has a role in controlling the money supply.

Vocabulary

  • monetary policy
  • reserve ratio (reserve requirement)
  • fractional reserve banking
  • discount rate
  • deposit multiplier (deposit expansion
  • multiplier /simple money multiplier)
  • open-market operations
  • federal funds rate
  • easy-money policy (expansionary)
  • tight-money policy (contractionary)
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